<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
FORM 10-Q
-----------
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended March 31, 1997
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________.
Commission file number 0-21708
GOLDEN STAR RESOURCES LTD.
(Registrant's telephone number, including area code)
Canada 98-0101955
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Norwest Center
1700 Lincoln Street
Suite 1950
Denver, Colorado 80203
(Address of Principal Executive Office) (Zip Code)
(303) 830-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days
Yes X No
------- -------
Number of Common Shares outstanding as of May 9, 1997: 29,647,636
<PAGE> 2
GOLDEN STAR RESOURCES LTD.
INDEX
<TABLE>
<S> <C>
Part I Financial Information
Item 1. Financial Statements .......................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition,
Results of Operations and Recent Developments ................. 11
Part II Other Information
Item 1. Legal Proceedings ............................................. 15
Item 6. Exhibits and Reports on Form 8-K .............................. 15
Signatures .................................................................... 16
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the company to be materially different from any
future results, performance, or achievements express or implied by such
forward-looking statements. Such factors include, among others, gold and
diamond exploration and development costs and results, fluctuation of gold
prices, foreign operations and foreign government regulation, competition,
uninsured risks, recovery of reserves, capitalization and commercial viability
and requirements for obtaining permits and licenses.
ii
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of United States Dollars except share amounts)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
As of March 31, As of December 31,
1997 1996
------------ ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 11,930 $ 15,663
Accounts receivable 5,651 5,116
Inventories 874 1,027
Other assets 516 376
------------ ------------
Total Current Assets 18,971 22,182
RESTRICTED CASH 1,950 2,015
DEFERRED EXPLORATION 71,308 64,721
INVESTMENT IN OMAI GOLD MINES LIMITED 2,819 3,279
FIXED ASSETS 3,428 3,666
OTHER ASSETS 516 420
------------ ------------
Total Assets $ 98,992 $ 96,283
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,478 $ 5,830
Accrued wages and payroll taxes 1,025 1,065
------------ ------------
Total Current Liabilities 6,503 6,895
OTHER LIABILITIES 98 92
------------ ------------
Total Liabilities 6,601 6,987
------------ ------------
MINORITY INTEREST 10,648 11,202
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
SHARE CAPITAL 135,433 129,954
(Common shares, without par value, unlimited shares
authorized. Shares issued and outstanding: March
31, 1997 - 26,622,636; December 31, 1996 - 25,941,103)
Stock option loans (4,012) (4,012)
DEFICIT (49,678) (47,848)
------------ ------------
Total Shareholders' Equity 81,743 78,094
------------ ------------
Total Liabilities and Shareholders' Equity $ 98,992 $ 96,283
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
1
<PAGE> 4
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of United States Dollars except share amounts)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
-------------------- --------------------
<S> <C> <C>
REVENUE
Precious metals sales $ 401 $ 838
Interest and other 187 212
-------------------- --------------------
588 1,050
-------------------- --------------------
COSTS AND EXPENSES
Cost of goods sold 866 1,180
Depreciation 312 295
General and administrative 2,080 1,970
Exploration expense 140 13
Interest expense 23 --
Foreign exchange loss 91 77
-------------------- --------------------
3,512 3,535
-------------------- --------------------
PROFIT (LOSS) BEFORE THE UNDERNOTED (2,924) (2,485)
Gain on subsidiary's issuance of common stock -- 2,001
Omai preferred share redemptions surplus 554 --
-------------------- --------------------
Net profit (loss) before minority interest (2,370) (484)
Minority interest loss 540 449
-------------------- --------------------
NET PROFIT (LOSS) $ (1,830) $ (35)
==================== ====================
NET PROFIT (LOSS) PER SHARE $ (0.07) $ (0.001)
==================== ====================
WEIGHTED AVERAGE SHARES OUTSTANDING
(millions of shares) 26.5 24.5
==================== ====================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
2
<PAGE> 5
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of United States Dollars except share amounts)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
-------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net profit (loss) $ (1,830) $ (35)
Reconciliation of net income to net cash used in operations:
Depreciation 312 295
Premium on Omai Preferred Share Redemptions (554) --
Gain on issuance of common stock by subsidiary -- (2,001)
Minority interest loss (540) (449)
Changes in non-cash operating working capital (914) (191)
-------------------- --------------------
Net Cash Used in Operating Activities (3,526) (2,381)
-------------------- --------------------
INVESTING ACTIVITIES:
Expenditures on mineral properties, net of joint venture
recoveries (6,587) (3,583)
Equipment purchases (74) (758)
Omai Preferred Share Redemption 1,014 --
Other assets and investments -- 7
-------------------- --------------------
Net Cash Used in Investing Activities (5,647) (4,334)
-------------------- --------------------
FINANCING ACTIVITIES:
Restricted cash 65 --
Proceeds from issuance of subsidiary's stock -- 9,021
Offering costs of subsidiary (14) (126)
Increase in minority interest -- 147
Issuance of share capital and warrants, net 5,429 12,897
Issuance of share capital under options 50 2,287
Stock option loan additions -- (1,472)
Other (90) --
-------------------- --------------------
Net Cash Provided by Financing Activities 5,440 22,754
-------------------- --------------------
Increase (decrease) in cash (3,733) 16,039
Cash and short-term investments, beginning of period 15,663 9,498
-------------------- --------------------
Cash and short-term investments, end of period $ 11,930 $ 25,537
==================== ====================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE> 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
These financial statements and the accompanying notes should be read in
conjunction with the financial statements and related notes included in the
annual report on Form 10-K for Golden Star Resources Ltd. (the "Company") for
the fiscal year ended December 31, 1996, on file with the Securities and
Exchange Commission and with the Ontario Securities Commission (hereinafter
referred to as "the Company's 1996 10-K"). All amounts are in United States
dollars unless otherwise stated.
The unaudited financial statements as of March 31, 1997, and for the three
months ended March 31, 1997 and 1996, reflect all adjustments, consisting
solely of normal recurring items, which are necessary for a fair presentation
of financial position, results of operations, and cash flows on a basis
consistent with that of the prior audited consolidated financial statements.
On April 22, 1997, the Company filed on Form 10-Q/A an amendment to its first
quarter 1996 results, reflecting a reduction in the gain recorded on the sale
of the common shares of the Company's subsidiary, Pan African Resources
Corporation. The reduction in the gain was also reflected in the financial
results reported in the Company's filing on Form 10-K for the year ended
December 31, 1996. All historical and comparative amounts shown in these
financial statements reflect the amounts reported on the March 31, 1996 Form
10-Q/A and the December 31, 1996 Form 10-K.
(1) INVENTORIES
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------- -----------------
<S> <C> <C>
Gold Inventory $ 297 $ 384
Materials and Supplies 577 643
---------------- ----------------
$ 874 $ 1,027
================ ================
</TABLE>
(2) FIXED ASSETS
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------- -----------------
<S> <C> <C>
Building $ 1,833 $ 1,833
Machinery & Equipment 4,750 4,676
---------------- ----------------
6,583 6,509
Accumulated Depreciation (3,155) (2,843)
---------------- ----------------
$ 3,428 $ 3,666
================ ================
</TABLE>
4
<PAGE> 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(3) DEFERRED EXPLORATION
<TABLE>
<CAPTION>
Deferred Deferred
Exploration Exploration
Expenditures Capitalized Capitalized Joint Expenditures
as at Exploration Acquisition Venture Property as at
Dec 31, 1996 Expenditures Expenditures Recoveries Abandonments March 31, 1997
=====================================================================================
<S> <C> <C> <C> <C> <C> <C>
GUYANA
Eagle Mountain $ 111 127 -- -- -- 238
Quartz Hill 1,347 -- -- -- -- 1,347
Upper Potaro Diamond/
Amatuk Diamond 1,010 61 8 -- -- 1,079
Mazaruni/Upper Mazaruni
Diamond 2,729 61 -- -- -- 2,790
Wenamu Gold 512 -- -- -- -- 512
Five Stars Gold 5,767 171 -- -- -- 5,938
Five Stars Diamond 1,097 92 24 -- -- 1,213
BHP Gold Projects 151 41 -- -- -- 192
Guyana Diamond Permits 27 2 -- -- -- 29
Other 1,376 (9) -- -- -- 1,367
-------------------------------------------------------------------------------------
Sub-total 14,127 546 32 -- -- 14,705
-------------------------------------------------------------------------------------
SURINAME
Benzdorp/Lawa 3,341 3 -- -- -- 3,344
Gross Rosebel 9,494 2,781 -- (1,058) -- 11,217
Headley's Right of
Exploration 311 -- -- -- -- 311
Thunder Mountain 453 -- -- -- -- 453
Saramacca 1,569 42 -- (11) -- 1,600
Sara Kreek 155 104 15 -- -- 274
Tempati Reconnaissance 161 24 75 -- -- 260
Tapanahony Reconnaissance 86 13 -- (2) -- 97
Kleine Saramacca 104 -- -- -- -- 104
Lawa Antino 764 678 -- -- -- 1,442
Suriname Diamond Projects 310 56 -- -- -- 366
Ulemari Reconnaissance 53 136 -- (19) -- 170
Other Exploration 20 (5) -- -- -- 15
Other 232 (34) -- -- -- 198
-------------------------------------------------------------------------------------
Sub-total 17,053 3,798 90 (1,090) -- 19,851
-------------------------------------------------------------------------------------
FRENCH GUIANA
(GUYANOR RESSOURCES S.A.)
Dorlin 628 440 -- (440) -- 628
St--Elie 1,973 514 -- (514) -- 1,973
Dieu--Merci 382 133 -- (133) -- 382
Yaou 7,087 436 -- (436) -- 7,087
Paul Isnard/Eau Blanche 3,629 193 -- (193) -- 3,629
SOTRAPMAG 1,520 201 -- -- -- 1,721
Dachine 575 97 -- (44) -- 628
Other 1,331 6 -- -- -- 1,337
Diamond Projects 204 1 -- -- -- 205
-------------------------------------------------------------------------------------
Sub-total 17,329 2,021 -- (1,760) -- 17,590
-------------------------------------------------------------------------------------
AFRICA (PAN AFRICAN RESOURCES
CORPORATION)
Ivory Coast/Comoe 3,951 212 -- -- -- 4,163
Mali/Dioulafoundou 2,763 55 12 -- -- 2,830
Mali/Melgue 56 39 -- -- -- 95
Mali/Other 30 17 47
Eritrea/Galla Valley 1,317 191 -- -- -- 1,508
Eritrea/Other 55 -- 55
Kenya/Ndori 901 290 -- -- -- 1,191
Other 53 101 -- -- -- 154
-------------------------------------------------------------------------------------
Sub-total 9,126 905 12 -- -- 10,043
-------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
<TABLE>
<CAPTION>
Deferred Deferred
Exploration Exploration
Expenditures Capitalized Capitalized Joint Expenditures
as at Exploration Acquisition Venture Property as at
Dec 31, 1996 Expenditures Expenditures Recoveries Abandonments March 31, 1997
=====================================================================================
<S> <C> <C> <C> <C> <C> <C>
LATIN AMERICA (SOUTHERN STAR
RESOURCES LTD.)
Brazil/Andorinhas 3,547 1,388 -- -- -- 4,935
Brazil/Abacaxis 1,375 322 7 -- -- 1,704
Brazil/Other 583 5 -- -- -- 588
Bolivia/San Simon 858 36 -- -- -- 894
Bolivia/Sunsas 221 127 -- -- -- 348
Bolivia/Other 502 141 2 -- -- 645
--------------------------------------------------------------------------------------
Sub-total 7,086 2,019 9 -- -- 9,114
--------------------------------------------------------------------------------------
OTHER -- 5 -- -- -- 5
--------------------------------------------------------------------------------------
TOTAL $64,721 9,294 143 (2,850) -- $71,308
======================================================================================
</TABLE>
The recoverability of amounts shown for deferred exploration is dependent upon
the sale or discovery of economically recoverable reserves, the ability of the
Company to obtain necessary financing to complete the development, and upon
future profitable production or proceeds from the disposition thereof. The
amounts deferred represent costs to be charged to operations in the future and
do not necessarily reflect the present or future values of the properties.
(4) INVESTMENT IN OMAI GOLD MINES LIMITED
Details regarding the Company's investment in the common and preferred share
equity of Omai Gold Mines Ltd. and its share of equity losses not recorded for
the year ended December 31, 1996 and the quarter ended March 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Common Shares Preferred Shares
------------- ----------------
<S> <C> <C>
December 31, 1996 $ -- $ 3,279
Less: Preferred Share Redemption -- (1,014)
Add: Premium on Preferred Share Redemption -- 554
------------ --------------
March 31, 1997 $ -- $ 2,819
============ ==============
</TABLE>
The Company's share of Accumulated Losses at:
<TABLE>
<S> <C>
December 31, 1996 $(2,713)
=======
March 31, 1997 $(1,502)
=======
</TABLE>
(5) CHANGES TO SHARE CAPITAL
During the three months ended March 31, 1997, 8,333 shares were issued for
options previously granted under the Company's Employees' Stock Option Plan.
During the three months ended March 31, 1997, 673,200 shares were issued for
the exercise of all of the Company's outstanding Cdn$11.00 warrants, providing
proceeds of $5.4 million.
6
<PAGE> 9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(6) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada which differ in certain
respects from those principles that the Company would have followed had its
financial statements been prepared in accordance with generally accepted
accounting principles in the United States. Differences which materially affect
these consolidated financial statements are:
(a) For United States GAAP ("U.S. GAAP"), exploration and general and
administrative costs related to projects are normally charged to expense
as incurred. As such, the majority of costs charged to Exploration Expense
and Abandonment of Mineral Properties under Canadian GAAP would have been
charged to earnings in prior periods under U.S. GAAP. Property acquisition
costs are capitalized for both Canadian and U.S. GAAP.
(b) For periods prior to May 15, 1992 (the "Amalgamation"), the Company's
reporting currency was the Canadian dollar. Subsequent to the Company's
Amalgamation and moving of corporate headquarters to the United States,
the reporting currency was changed to the U.S. dollar. As such, for the
financial statements for periods prior to May 15, 1992, the Company's
financial statements were translated into U.S. dollars using a translation
of convenience. U.S. GAAP requires translation in accordance with the
current rate method.
(c) Under U.S. GAAP, the investment in Omai Gold Mines Limited would have been
written off in prior years and, therefore, the entire Omai Preferred Share
Redemption would have been included in income. Under Canadian GAAP, a
portion of the Omai Preferred Share Redemption is included in income with
the remainder reducing the carrying value of the Company's preferred stock
investment.
(d) U.S. GAAP requires that compensation expense be recorded for the excess of
the quoted market price over the option price granted to employees and
directors under stock option plans. Under Canadian GAAP, no compensation
expense is recorded for such awards.
(e) Canadian GAAP allows classification of investments which are capable of
reasonably prompt liquidation as current assets. As such, all of the
Company's investments are included under the caption "short-term
investments" on the balance sheet under current assets. U.S. GAAP requires
classification as current or long term assets based upon the anticipated
maturity date of such instruments.
(f) The gains on subsidiaries issuance of common stock recorded under Canadian
GAAP in respect of the Guyanor initial public offering in 1995 and the
PARC private placements in 1995 and 1996 are not appropriate under U.S.
GAAP.
(g) The Company eliminated its accumulated deficit through the amalgamation
(defined as a quasi-reorganization under U.S. GAAP) effective May 15,
1992. Under U.S. GAAP, the cumulative deficit was greater than the deficit
under Canadian GAAP due to the write-off of certain deferred exploration
costs described in (a) above.
7
<PAGE> 10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(h) Under U.S. GAAP, cash (and cash equivalents) includes bank deposits, money
market instruments, and commercial paper with original maturities of three
months or less. Canadian GAAP permits the inclusion of temporary
investments with maturities greater than 90 days in cash.
(i) Under U.S. GAAP, available-for-sale securities are recorded at fair value
and unrealized gains and losses are recorded as a separate component of
shareholders' equity. Fair value is determined by quoted market prices.
(j) Under U.S. GAAP, accrued severance and social charges of $1.1 million
resulting from suspension of alluvial mining operations at SOTRAPMAG would
not have been recorded as of December 31, 1996 as the requirements for
accrual under U.S. GAAP were not satisfied. Under U.S. GAAP, such accruals
have been recorded in the first quarter of 1997.
Had the Company followed U.S. GAAP, certain items on the statements of
operations and balance sheets would have been reported as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Net profit (loss) under Canadian GAAP $ (1,830) $ (35)
Net effect of the deferred exploration expenditures on loss
for the period (a) (6,444) (3,165)
Effect of recording compensation expense under stock option
plans (d) (21) (34)
Record loss for severance accruals (j) (1,115) --
Reversal of the gain on subsidiary's issuance of common
stock (f) -- (2,001)
Effect of Omai preferred share redemption (c) 460 --
-------------- --------------
Loss under U.S. GAAP before minority interest (8,950) (5,235)
Adjustment to minority interest 817 182
-------------- --------------
Loss under U.S. GAAP $ (8,133) $ (5,053)
============== ==============
Loss per share under U.S. GAAP $ (0.31) $ (0.20)
============== ==============
</TABLE>
8
<PAGE> 11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
The effect of the differences in accounting under Canadian GAAP and U.S. GAAP
on the balance sheets and statements of cash flows are as follows:
BALANCE SHEET
<TABLE>
<CAPTION>
As of March 31, 1997 As of December 31, 1996
---------------------- -----------------------
Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash (h) $ 9,433 $ 8,431 $ 9,664 $ 9,664
Short term investments (e) 2,497 1,002 5,999 2,500
Other current assets 7,041 7,041 6,519 6,519
Restricted cash 1,950 1,950 2,015 2,015
Deferred exploration (a) 71,308 18,754 64,721 18,611
Investment in Omai Gold Mines Limited (c) 2,819 -- 3,279 --
Long-term investments (e) -- 2,497 -- 3,499
Other assets 3,944 3,944 4,086 4,087
--------- --------- --------- ---------
Total Assets $ 98,992 $ 43,619 $ 96,283 $ 46,895
========= ========= ========= =========
Liabilities 6,601 6,601 6,987 5,872
Minority interest (a) 10,648 9,692 11,202 11,064
Share capital, net of stock option loans (g) 131,421 128,568 125,942 123,068
Cumulative translation adjustments (b) -- 1,595 -- 1,595
Deficit (a)(c)(d)(f) (49,678) (102,837) (47,848) (94,704)
--------- --------- --------- ---------
Total Liabilities and Shareholders'
Equity $ 98,992 $ 43,619 $ 96,283 $ 46,895
========= ========= ========= =========
</TABLE>
STATEMENTS OF CASH FLOWS
NET CASH PROVIDED BY (USED IN):
<TABLE>
<CAPTION>
OPERATING ACTIVITIES INVESTING ACTIVITIES FINANCING ACTIVITIES
-------------------- -------------------- --------------------
Canadian U.S. Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP GAAP GAAP
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
For the three months ended
March 31, 1997 $(3,526) $(8,979) $(5,647) $ 2,283 $ 5,440 $ 5,463
For the three months ended
March 31, 1996 $(2,381) $(5,399) $(4,334) $(3,382) $22,754 $22,605
</TABLE>
The statements of cash flows reflect the impact of the previously discussed
adjustments (a) (c) (d) (f). There were no significant non-cash transactions
impacting the statement of cash flows for the quarters ended March 31, 1997 and
1996.
9
<PAGE> 12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(7) SUBSEQUENT EVENTS
On May 5, 1997, the Company sold through a prospectus offering 3,025,000 common
shares at $7.50 per share, for total proceeds of $22.7 million. The shares were
issued under the Company's shelf prospectuses in the United States and Canada.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND RECENT DEVELOPMENTS
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and related notes. The financial statements
have been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). For U.S. GAAP reconciliation see attached financial
statement Note 6.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE REFORM ACT
The following contains certain forward-looking statements within the meaning of
the Reform Act. Actual results, performance or achievements of the Company
could differ materially from those projected in the forward-looking statements
due to a number of factors, including those set forth under "Risk Factors" in
the Company's Annual Report on Form 10-K. Readers are cautioned not to put
undue reliance on forward-looking statements. The Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to the Three Months Ended
March 31, 1996
During the first quarter of 1997, the Company reported a net loss of $1.8
million or $0.07 per share as compared to a net loss of $35,000 or $0.001 per
share for the first quarter of 1996. The 1997 first quarter loss reflects
revenue and expenses similar to the 1996 period. The net loss in 1996 was
offset by a gain of $2.0 million on the sale of shares of Pan African Resources
Corporation ("PARC") which did not recur in 1997.
Total revenues of $0.6 million for the first quarter of 1997 (as compared to
$1.1 million the first quarter of 1996) decreased due to reduced gold sales in
French Guiana from Societe de Travaux Publics et de Mines Auriferes en Guyane
("SOTRAPMAG"), with interest and other income decreased from the prior period
due to reduced average cash balances invested. Cost of goods sold decreased by
$0.3 million as a result of the reduced production of gold by SOTRAPMAG.
Revenue from gold sales for the first quarter of 1997 was $0.4 million, as
compared to $0.8 million in the first quarter of 1996.
During the first quarter of 1997, the Company, through Guyanor Ressources S.A.
("Guyanor"), began implementation of a program to discontinue the alluvial
operations conducted at SOTRAPMAG. Alluvial gold production continued during the
first quarter of 1997, with operating losses of $0.5 million incurred during the
period which were consistent with estimates previously made by the Company.
Mining operations were suspended on April 17, 1997 after receipt of regulatory
approvals for SOTRAPMAG's closure plans. The Company estimates that additional
operating losses of $0.1 million will be incurred from April 1 to closure on
April 17. All accruals for future obligations are included in current
liabilities and no significant adjustments were made to accruals for obligations
associated with the shut-down during the first quarter of 1997. Land
rehabilitation is scheduled to be completed by the end of the second quarter of
1997. Relocation and retraining of certain employees, as well as
company-provided outplacement services are anticipated to be complete by the end
of the third quarter of 1997.
Omai Gold Mines Limited ("OGML"), in which the Company maintains a 30% common
share equity interest, reported net income of $4.2 million for the first
quarter of 1997 compared to a net loss of $1.4 million in the first quarter of
1996. The Omai mine produced 90,454 ounces of gold in the first quarter of 1997
(compared to 27,204 ounces of gold in the first quarter of 1996). Production
during the first
11
<PAGE> 14
quarter of 1996 was adversely impacted by the tailings dam failure in August
1995, with production resuming in February 1996. During the first quarter of
1997, the Company recorded redemptions of Class "I" preferred shares of OGML of
$1.0 million. The Company received no such redemptions during the first quarter
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company held cash and short term investments of $11.9
million ($25.5 million as of March 31, 1996 and $15.7 million as of December
31, 1996) and working capital of $12.5 million ($27.3 million as of March 31,
1996). The decrease in cash resources and working capital resulted from
expenditures on the Company's exploration activities during 1996 and the first
quarter of 1997, offset by proceeds from the issuance of Guyanor shares in
conjunction with the listing on the Nouveau Marche in the fourth quarter
of 1996.
Sources of funding during the first quarter of 1997 included the exercise of
673,200 of the Company's Cdn$11.00 warrants for proceeds of $5.4 million and
joint venture arrangements which provided $2.9 million in cash recoveries of
exploration expenditures.
Product and supplies inventories, accounts receivables and other current assets
increased $0.5 million during the quarter in the aggregate reflecting accounts
receivable from preferred share redemptions of $1.0 million in the first
quarter of 1997 (as compared to the absence of such redemptions during the
first quarter of 1996), offset by reductions in gold and supplies inventories
due to the closure activities at SOTRAPMAG.
Cash used in investing activities of $5.6 million for the three months ended
March 31, 1997 increased as compared to $4.3 million for the three months ended
March 31, 1996, primarily due to an increase in exploration spending of $3.0
million and reduction in fixed asset purchases of $0.7 million as compared to
the first quarter of 1996, offset by OGML preferred share redemptions of $1.0
million in the first quarter of 1997.
Cash provided by financing activities of $5.4 million for period decreased as
compared to $22.8 million for the corresponding period in 1996 due to the
Company's unit offering and the PARC private placement which occurred in the
first quarter of 1996. Share capital increased by $5.5 million for the three
months ended March 31, 1997, reflecting the exercise of warrants (noted above),
compared with $15.2 million during the three months ended March 31, 1996,
reflecting the 1996 unit offering.
On May 5, 1997, the Company sold through a prospectus offering 3,025,000 common
shares at $7.50 per share, for total proceeds of $22.7 million. The shares were
issued under the Company's shelf prospectuses in the United States and Canada.
Africa (Pan African Resources Corporation)
Total exploration and acquisition expenditures by PARC in Africa for the first
quarter of 1997 amounted to $0.9 million (compared to $1.2 million in the first
quarter of 1996), and primarily reflect expenditures on exploration activities
in the Ivory Coast, Eritrea and Kenya. General and administrative expenditures
for the first quarter of 1997 totaled $0.3 million (compared to $0.5 million in
the first quarter of 1996).
On February 18, 1997, the Company and PARC signed an option agreement with
Adamas Resources Corp. ("Adamas") granting Adamas the sole and exclusive option
to acquire a 50% interest in all of the
12
<PAGE> 15
Company's current and future rights to the Kolissen property. The option
agreement is subject to acceptance by the Vancouver Stock Exchange ("VSE"). In
order to maintain its rights under the option, Adamas must incur minimum
exploration expenditures on the Kolissen property of at least $0.5 million
during the first 12 months following the date Adamas receives regulatory
approval from the VSE and $1.5 million during the following 18-month period.
Should Adamas fail to make the required expenditures within the prescribed
deadlines, it will be required to pay the amount of the shortfall to PARC in
cash or capital stock in Adamas or an interest in mineral rights owned by
Adamas with a fair value equivalent to the shortfall, subject to PARC's
approval. Assuming VSE approval is obtained, Adamas intends to conduct the work
program on the Kolissen property during 1997.
On March 7, 1997, PARC granted African Selection Mining Corporation ("ASM") a
three-year option to acquire 50% of the issued and outstanding shares of PARC
Dioulafoundou and PARC Fougala. In order to maintain its rights under the
option, ASM must incur exploration expenditures on the properties of at least
$4.5 million prior to October 31, 1999 with $450,000 during the period
commencing March 1, 1997 and ending September 30, 1997 ("Phase I"), $1.5
million during the period commencing October 1,1997 and ending September 30,
1998, and $2.5 million during the period commencing October 1, 1998 and ending
October 31, 1999. Should ASM fail to make the required $450,000 in expenditures
for Phase I within the prescribed deadline, it will be required to pay the
amount of the shortfall to PARC in cash, subject to certain contingencies.
In May 1997, the Company entered into a demand revolving line of credit with
PARC, whereby the Company will loan PARC up to $2.0 million. The line of credit
expires on December 31, 1997 and may be extended to December 31, 1998 at the
Company's discretion. The line of credit bears interest at the prime rate of a
major commercial bank plus 2%. The principal and interest on outstanding
advances are convertible, at any time at the option of the Company, into common
shares of PARC at a conversion price of Cdn$0.37 per share. The conversion
provisions of the line of credit are subject to approval by PARC's
shareholders.
French Guiana (Guyanor Ressources S.A.)
Total exploration expenditures by Guyanor for the first quarter amounted to $2.0
million, offset by joint venture recoveries of $1.8 million (compared to
expenditures of $1.2 million and recoveries of $1.1 million in the first quarter
of 1996). Activities in French Guiana focused primarily on further work at
St-Elie, Paul-Isnard, Yaou and Dorlin. General and administrative expenditures
for Guyanor which were not reimbursed by joint venture partners amounted to $0.5
million for the quarter ended March 31, 1997 (compared to $0.5 million in the
first quarter of 1996).
Guyana
Exploration and acquisition expenditures in the first quarter of 1997 in Guyana
amounted to $0.6 million (compared to $1.1 million during the first quarter of
1996). Activities in Guyana focused primarily on the Five Stars and Eagle
Mountain gold projects.
Suriname
Exploration expenditures in Suriname during the first quarter of 1997 focused
principally on the Gross Rosebel gold project in joint venture with Cambior
Inc. ("Cambior"). Total spending in Suriname in the period of $3.8 million was
offset by joint venture recoveries of $1.1 million (as compared to
13
<PAGE> 16
expenditures of $2.0 million and recoveries of $1.3 million during the first
quarter of 1996) as Cambior has met its earn-in requirements at Gross Rosebel
and all expenditures are shared equally.
Southern Star Resources Ltd.
Exploration expenditures for the first quarter of 1997 of $2.0 million as
compared to $0.6 million during the first quarter of 1996 by Southern Star
increased due to expanded exploration programs at the Andorinhas and Abacaxis
projects in Brazil.
14
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are currently no pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of its properties or those of any
of its subsidiaries is subject. The Company and its subsidiaries are, however,
engaged in routine litigation incidental to their business. No material legal
proceedings involving the company are pending, or, to the knowledge of the
Company, contemplated, by any governmental authority. The Company is not aware
of any material events of noncompliance with environmental laws and
regulations. The exact nature of environmental control problems, if any, which
the Company may encounter in the future cannot be predicted, primarily because
of the changing character of environmental regulations that may be enacted with
foreign jurisdictions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) The Company filed electronically with the Securities and Exchange
Commission ("SEC") on March 10, 1997, a Form 8-K concerning various
issues including drilling results from Antino in Suriname, drilling
results from the Yaou project in French Guiana, drilling results from
Andorinhas, exploration update and trenching results at St-Elie and
completion of Dachine bulk sample processing.
15
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN STAR RESOURCES LTD.
By: /s/ David A. Fennell
------------------------------------------
David A. Fennell
President and Chief Executive Officer
By: /s/ Gordon J. Bell
------------------------------------------
Gordon J. Bell
Vice President and Chief Financial Officer
May 15, 1997
16
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,930
<SECURITIES> 0
<RECEIVABLES> 5,651
<ALLOWANCES> 0
<INVENTORY> 874
<CURRENT-ASSETS> 18,971
<PP&E> 6,583
<DEPRECIATION> (3,155)
<TOTAL-ASSETS> 98,992
<CURRENT-LIABILITIES> 6,503
<BONDS> 0
0
0
<COMMON> 135,433
<OTHER-SE> (4,012)
<TOTAL-LIABILITY-AND-EQUITY> 98,992
<SALES> 401
<TOTAL-REVENUES> 588
<CGS> 866
<TOTAL-COSTS> 3,512
<OTHER-EXPENSES> (554)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (1,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,830)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,830)
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
